In line with market expectations, the Bank of Switzerland at today’s meeting did not decide to change the parameters of its monetary policy. This is good information for all Poles who pay back mortgages taken in franc.
The extremely low interest rate on the Swiss currency continues to effectively offset the huge increase in the value of the franc against the Jai, which started in the second half of 2008 and is very visible recently
SMP’s decision was not a surprise
The lack of interest rate hikes in Switzerland did not surprise the market. All economists and analysts expected this. The target range for the 3-month Libor CHF rate will still be from 0.00% to 0.75%, and SMP will strive to stabilize it at 0.25%. The tightening of monetary policy by the monetary authorities of this country would already be a real “shot in the knee” for Switzerland’s exports.
All the more so because the demand of foreign investors for the franc, which is widely regarded as the safest shelter in difficult times, has been enormous for a long time. Yesterday, on the wave of escape of global market participants from risk (situation in Japan and Arab countries and the European debt crisis), the Swiss currency against the dollar set a new, record high (USD / CHF fell to 0.8918), and to the highest level in history they were very short on the euro – the EUR / CHF rate declined to 1.2429 and was only slightly higher than the minimum of 1.2399 set in December last year.
SMP decided to raise inflation forecasts (this year it is to amount to 0.8%, which is twice as high as the Bank assumed in December) and GDP (to 2.0% from 1.5%). However, this does not change our assessment that we will have to wait for a possible increase in interest rates in Switzerland for some time – we forecast that at least until September. There are a lot of external risk factors for Switzerland’s GDP growth (it can be seen that SMP is taking them into account because its economic growth projection is lower than the market average), and inflation at 0.8% is still far from critical for SMP level 2, 0%, although of course it shows a clear upward trend.
Jai and Franc
The huge demand for a safe franc is also reflected in hiccups on the Polish currency market. The more so that the Jai, considered by foreign investors as the currency of emerging economies, is and in itself sold by them in the realities of increasing tension in global markets. This morning the CHF / USD exchange rate rose to a maximum of 3.2730, i.e. to the highest level since February 2009, when it was a maximum of 3.3306 on the wave of the financial crisis and was record-breaking.